Chapter 5 in your textbook describes negative and positive risks.
- Describe a work activity on a project (one with which you are familiar, and which might be from a case study or textbook) that had a positive influence, and then describe a work activity that had an influence of a negative nature.
- Which typical strategy would you, as the project manager, use in addressing each risk event?
- Support your positions with at least one current (no older than five years) scholarly source, beyond the course materials and textbooks.
130 MASTERING RISK AND PROCUREMENT IN PROJECT MANAGEMENT
response plans. This proactive approach enables the project manager
time to think through responses and, in some cases, identify more
than one response where the project manager can use strategy as to
the best course of action. Proactive response planning also allows the
project manager time to document best responses and assign owner-
ship of particular risks to individuals who can carry out the response.
This is an efficient way the project manager can oversee risk response,
as preapproved responses can be assigned to individuals to be carried
out in the occurrence of a risk event and do not require subject matter
experts to use a cumbersome, last-minute decision process. Proactive
planning in risk responses is truly the best way to manage risk for
project activities; it gives the project manager much more control of
not only how to respond to risk, but who can assist in risk responses
being carried out correctly.
Both reactive and proactive response modes are the general
condition the project manager and project staff will be in based on
pre-project planning. In most cases, the assumption in risk response
planning is to address problems that will have a negative effect on
work activities and the project. Although in most cases this is true,
occasionally an issue can result in a positive outcome that was unex-
pected and will also need a response. Projects, then, have the poten-
tial of both negative and positive risks.
Negative Risks
Any influence that has a negative effect on a work activity is con-
sidered to be a negative risk and results in problems that will have to
be addressed. The project manager and other project staff evaluating
work activities for potential risks can generally spot areas that may
have a potential for a problem and will need a response plan to address
the risk, should it occur. There are four typical strategies the project
manager can use in addressing a risk event, which typically would take
into consideration the overall risk tolerance of the project and organi-
zation as well as options that might be available for response planning
and strategy project manager might use in a response that may affect
other work activities within the project.
05/20/2020 – RS0000000000000000000002125614 (Shantelle
Hildred) – Mastering Risk and Procurement in Project
Management
CHAPTER 5 • RISK RESPONSE STRATEGIES 131
• Avoid risk— Identify the root cause of a risk event and elimi-
nate or alter the conditions of the activity to create a new sce-
nario without the potential risk. This is simply eliminating the
risk before it happens and should be the best-case action in
response to a risk. The caution to the project manager and proj-
ect team for eliminating a risk is what actions have to be taken
to eliminate or alter a condition and what effects that could
have on the output deliverable for that work activity.
• Reduce risk— Similar to avoidance in altering the conditions
of a work activity such that although it may not be possible to
completely eliminate the potential risk, it can reduce the impact
or probability of its occurrence. Any action that can be taken to
either reduce or eliminate a risk event should be the first course
of action the project manager takes in planning response.
• Transfer risk— Requires the reassignment of responsibil-
ity in such a way that the impact of the risk is absorbed by an
alternate party. An example of this would be using an exter-
nal subcontractor for a particular work activity with significant
potential risk items as opposed to using the organization’s inter-
nal resources, thus transferring some or all of the responsibility
of identified risks out of house.
• Accept risk— The last course of action the project manager
should use in planning a response for a potential risk event—
simply accepting the outcome of the risk. There may be some
conditions given a specific work activity where specifications do
not allow any alteration of the conditions to eliminate, mitigate,
or transfer the impact of a risk event, and the project must bear
the full brunt of the impact. But this response can be accept-
able as a function of risk tolerance if the specific risk event has
minimal potential impact to the success of the project.
Benefits, Trade-Offs, and Pitfalls
The ability to avoid potential problems is the best course of
action, given this has the least amount of impact to an original plan
for an activity. This is an important factor for the project manager to
05/20/2020 – RS0000000000000000000002125614 (Shantelle
Hildred) – Mastering Risk and Procurement in Project
Management
132 MASTERING RISK AND PROCUREMENT IN PROJECT MANAGEMENT
consider when planning risk responses because one of the primary
responsibilities of the project manager is to complete all project activ-
ities as scheduled and on budget. This being the case, the project
manager would design risk responses in the best interest of maintain-
ing the project plan and having no negative influences alter the course
of that original plan. Avoidance is the only option that has maximum
benefit with little or no trade-off or pitfall.
If the project manager chooses to use actions that would reduce
risk or transfer risk, this usually is not accomplished without a trade-
off or pitfall of some kind. The strategy for mitigating or transferring
of a risk is the cost to benefit ratio and what course of action would be
available that has the least amount of impact to the budget or schedule
yet accomplishes the goal of minimizing the impact the risk event has.
Something as simple as utilizing a claim to an organization’s insurance
policy to cover a particular problem transfers financial responsibility
away from the project budget, leaving only residual issues with quality
and delay in schedule. Contractual stipulations allow the project man-
ager to transfer liability of a problem to another party, which opens
the door for benefits, such as the subcontractor having to pay for dam-
ages, schedule delays, or quality issues.
Although acceptance might be seen as having to bear the full
brunt of impact a risk event might have, it should not be seen as fail-
ure in that consideration must be made as to what level of impact
the problem actually has. If a problem is unavoidable and there is no
solution for transferring the risk to another party, having to accept
the impact of the problem is unavoidable. It may be the only course
of action. If the problem is a very large problem that may have severe
impact to schedule, cost, or quality, this can be detrimental to the
project. In some cases, acceptance might be the best course of action
if the impact is negligible to the schedule or budget and has little or
no impact on the quality of the deliverable. Designing an alternate
response for a minor risk could cost the project more than simply
accepting the risk impact as is. Regardless of the impact a risk has,
acceptance always comes at a price because it has an influence on
cost, schedule, or quality in some way, even minor, that was not origi-
nally planned.
05/20/2020 – RS0000000000000000000002125614 (Shantelle
Hildred) – Mastering Risk and Procurement in Project
Management
CHAPTER 5 • RISK RESPONSE STRATEGIES 133
Positive Risks
Any influence that has a positive effect on a work activity is
considered to be a positive risk and an opportunity that should be
addressed. Just as unplanned problems can affect work activities,
unplanned opportunities in some cases present themselves where the
project manager should be prepared with a response. An opportunity
can manifest itself simply out of a special condition of events. In some
cases, a problem or risk event, although unfortunate and still causing
a problem, can also generate an opportunity that would not have been
otherwise available if the problem had not occurred. Positive risks
can also influence response plan designs that would give the project
manager options in how to best utilize the opportunity. There are four
basic response plans that can be used when an opportunity is present:
• Exploit— An option where the project manager would take full
advantage of the opportunity, accepting all benefits that might
be available. He encourages any actions to increase the prob-
ability of this opportunity to maximize the benefit that would be
realized.
• Enhance— An option where the response is to promote fur-
ther actions that would not only increase the probability of its
occurrence, but more importantly increase the impact of the
opportunity. The focus here is to get maximum benefit.
• Share— An option where an opportunity was discovered by
more than one party and therefore the benefit is also to be
shared by each party. An opportunity might have been discov-
ered by one party and further enhanced by one or more parties
to maximize the benefit shared by all.
• Accept— This is simply acknowledging that the opportunity
exists and taking advantage of the opportunity if presented,
but not necessarily engaging in activities that would increase its
probability.
5.3 Contingency Response Strategy
If risk identification and response planning is possible at the
beginning of the project, response planning will be designed around
05/20/2020 – RS0000000000000000000002125614 (Shantelle
Hildred) – Mastering Risk and Procurement in Project
Management
134 MASTERING RISK AND PROCUREMENT IN PROJECT MANAGEMENT
general forms of risk and only have enough detail to adequately
respond to each type of risk. An example would be several work activi-
ties being performed outdoors. If weather is a problem, the response
would be to delay activities or rent large outdoor tents to cover the
activity zone(s), allowing work to continue. There may be cases where
a much more specific risk was identified and an actual plan that spe-
cifically states actions will be carried out if certain conditions are pres-
ent—this is called a contingency response .
By definition, a specially designed response is only carried out
contingent on certain conditions that would warrant specific actions.
A general response plan would probably be sufficient, but detailed
information suggests conditions that would warrant a very specific
response, and this response would be custom-designed for only one
risk. Project managers can therefore design contingency responses as
a form of strategy in resolving specific issues to accomplish a specific
outcome.
Designing contingencies is usually seen in the case where a
work activity has a specialized resource requirement (critical human
resource, specialized piece of equipment, and so on), and this activ-
ity is required to take place at a specific time, where the risk will be
high concerning the resource or completing the activity in the speci-
fied timeframe. With this risk being associated with this one poten-
tial problem and activity, a contingency or backup plan would have a
secondary resource in place to ensure the activity is completed in the
specified timeframe. The project manager may also have contingency
funds set aside in the budget for this one activity to respond quickly
if a secondary plan has to be implemented. How the specific contin-
gency plans are designed can involve a strategy of how internal versus
external resources are used, contingency budget planning, and sched-
ule buffers can be evaluated for the best course of action and the least
impact to the project budget and schedule.
Contractual Response Strategy
Another form of contingency planning and strategy can be seen
in the use of contracts between the organization and subcontractors,
vendors, and suppliers. Depending on how contracts are written,
05/20/2020 – RS0000000000000000000002125614 (Shantelle
Hildred) – Mastering Risk and Procurement in Project
Management